Most employees WANT to be exempt, right? They generally view it has having arrived – they no longer have to punch the clock. That’s a good thing! Well, according to the government, we’re depriving too many people of a right to overtime pay. Here what you need to know right now:
Exempt/Non-exempt is based upon a few things. For clarification because it’s easy to get them confused: Exempt means exempt from overtime pay, flat/same salary every pay period no matter how many (or few) hours they work. Non-exempt means they are NOT exempt from overtime – so, any hours over 40 MUST be paid at time and one-half of their regular rate.
Before we even get to evaluate the tasks that a position performs (no, not the title of the job…), the very first “test” is the Salary Basis review. Several years ago now, the Fair Labor Standards Act (FLSA), established in 1938, updated the salary basis test and stated that employees had to earn at least $455.00 per week. If they didn’t earn that, there was no need to move on to evaluate the tasks of the job. If you could get beyond that, you had to evaluate the primary duties of the position.
The best rule of thumb is to consider the amount of independent thought – yes, REAL independent thought that goes into the position. (Not the creativity of addressing the customer’s complaints by skipping lines in your established procedures.) Does the position TRULY have something to do with impacting the business? Now, managing MAY actually be managing critical functions of the business, not necessarily managing people but managing people makes it a little easier. (Um, if they are working right beside the people they are managing…) There are a slew of other questions you need to evaluate before coming to the final conclusion that the position is exempt or non-exempt.
Now that you’ve done all that and you’re happy, your employees are happy, work is moving along nicely, people are independently thinking all over the place. Well…how many of your exempt employees are earning less than $51,000 per year? Guess what? Yep – the salary basis is proposed to move all the way up to $984.00 per week or $51,168.00 per year. Anyone earning less than that will need to: 1) go back to punching a time clock and 2) be eligible for time and one-half of their regular rate for hours over 40. (Do NOT shoot the messenger!)
There are still a few hurdles that the proposal needs to go through before it is enacted as law. Do I know what the future holds with this? No. Can I say that it WILL happen? I’m reasonably confident as are many of my peers that it is going to happen.
Don’t panic yet but be prepared. Are your job descriptions up to date? Have you properly classified them as they stand today? Because…ready or not…
Selected Sources:
Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act (FLSA)
http://www.dol.gov/whd/overtime/fs17g_salary.pdf
After New Overtime Rule, Employers Will Seek Ways to Lower Labor Costs
http://www.shrm.org/legalissues/federalresources/pages/overtime-study.aspx
Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage
http://www.dol.gov/dol/aboutdol/history/flsa1938.htm
Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees; Final Rule
http://www.dol.gov/whd/regs/compliance/fairpay/preamble_final.htm